High out-of-pocket costs continue to present barriers to care for patients. Why is this happening, and how can policymakers ensure patients can access and afford their medicines?
Fierce Biotech publisher Rebecca Willumson sat down with Lori Reilly, Chief Operating Officer at PhRMA, at the J.P. Morgan Healthcare Conference in January to discuss these critical questions.
In the interview, Lori sheds light on who is responsible for driving up health care costs for patients, noting the 340B program, the country’s second largest federal drug program. Established in the 1990s, the program was initially intended to lower drug costs for vulnerable, low-income patients. Instead, Lori explains, the program’s lack of oversight allows 340B hospitals and pharmacies to profit from discounted medicines without passing the savings on to patients.
PhRMA is actively working to address this issue by promoting legislative reform at both the state and national levels, Lori says. Requiring greater government oversight and enacting common-sense reforms for the 340B program, she asserts, will help ensure that patients can access and afford the medicines they need.
Tune in to this segment to hear more about how policymakers can protect access and affordability for patients.
Rebecca Willumson:
Hi there. I'm Rebecca Willumson. I'm the publisher of Fierce Biotech, and I'm here today with Lori Reilly, Chief Operating Officer at PhRMA. Lori, thanks so much for joining me.
Lori Reilly:
Thanks for having me.
Rebecca Willumson:
So, before we begin, can you tell me a little bit about yourself and your role at PhRMA?
Lori Reilly:
Absolutely. So, Lori Reilly, I'm the Chief Operating Officer at PhRMA. I oversee all of our government affairs functions, so at the federal, state, and international level. I've been at PhRMA a little over 20 years, and yeah.
Rebecca Willumson:
Very good. All right, so let's begin.
Lori Reilly:
Great.
Rebecca Willumson:
So, as we kick off 2024, one of the frequent stories I've seen on social media is frustration patients have had when they show up to the pharmacy counter in January and fees are higher than they were in December. Tell me, what's going on there?
Lori Reilly:
Yeah, that's a great question, and I hear this a lot, that January surprise that patients feel. They've gone to the pharmacy maybe in December, they pay one price for a medicine, they show up in January to get their refill, and suddenly it's a different price. So, there's a couple of things happening there.
One, I would argue it's part of our insurance design that exists in this country where most people today have a deductible for their healthcare, which means that they have to pay a certain amount out of pocket before they actually feel like they have insurance. So for the average employer-insured individual, that's about $1,700 a month. For a family, about 3,000. And for those people that may not get coverage through their employer, let's say they get it on the Exchange, I think a Bronze Plan is about 73, $7,500. So that's a lot of money that you have to pay out of pocket before you even feel like you have insurance.
So that's part of it. So, I go to the pharmacy counter, I go to pick up my medicine and I'm going to have to pay fully out of pocket for a while. The second thing that's happening is that for medicines, typically the insurance company and their pharmacy benefit manager, what they charge you before you've gotten through your deductible is the full, what we call list price of a medicine. It is not the price that they've negotiated with the manufacturer, it's the list price. So oftentimes, patients are paying more, oftentimes much more than what their insurance company bought that medicine for, which for many patients that feels unfair. And candidly, it is unfair.
The other thing that is happening is that oftentimes these things called utilization management, they reset every year. So what that means is sometimes an insurance company says, "We want you to try this medicine first before we're going to let you have this medicine that your doctor may prescribe for you." They want you to fail at that before they advance you onto this one, even if you've been taking that medicine for years prior. So that's another frustration that we hear from patients, "I've got to fail before I get to start something new."
And then I would say the last thing that happens is the cost-sharing that a patient may pay when they get to the pharmacy is set by the insurance company. And that can change from year to year. And again, it's often also based on the list price of a medicine. So for example, if a medicine has a list price of $100 and your cost-sharing is 40%, then you're paying $40 out of pocket even though the insurance company may have bought it for $20. So this is a complicated system, no doubt. But the unfortunate thing for many patients is that frustration in the system where they've paid one price for maybe half of the last year, suddenly in January, it's like they're starting all over again. And what we see is patients unfortunately often abandon their prescriptions when they can't afford their medicine.
Rebecca Willumson:
So, tell me, what is the biopharma industry doing to make sure patients can afford these treatments?
Lori Reilly:
That's a great question. We feel an obligation to ensure that patients can access and afford the medicines they need. And what we have found is there actually does need to be some changes in public policy in order to make that a reality. So, we've been supporting a couple of pieces of legislation.
The first is ensuring that when we offer discounts to insurance companies and their pharmacy benefit managers that negotiate with us, that more of those savings flow down to the patient at the pharmacy counter. If the insurance company negotiates a 50% discount, well the patient should benefit from that. So we've worked to pass legislation in three states so far, West Virginia, Arkansas, and Indiana have all passed legislation. We're trying to get some of that passed at the federal level as well.
The second thing that we've been pushing for is ensuring that when I have cost-sharing for medicine, again, if I'm asked to pay a percentage of the price at the pharmacy counter, let's make sure that's a percentage of the discounted price, not of the list price. And the last thing, unfortunately, even with insurance, many patients still aren't able to access and afford their medicine. So pharmaceutical companies will often provide assistance to people who can't afford their medicine. Unfortunately, what has been happening is that insurance companies are not allowing that assistance that we provide to count towards a patient reaching that deductible. So a patient may go all year and never reach the deductible. And so they're paying out of pocket for all kinds of services. So we've been working, again, through legislation to say that if we're providing assistance, that that assistance should also help a patient reach their deductible.
Rebecca Willumson:
So, I want to pivot to another program that's meant to help patients. The 340B Program, which was created to help hospitals in underserved areas provide needed medicines to their vulnerable patients. So can you talk more about that program and the problems that need to be addressed?
Lori Reilly:
Yeah, absolutely. So, the 340B Program, I would argue, well-intentioned program. The idea was for a certain number of hospitals, this passed back in the 1990s, as well as for example, federally funded health centers that are serving vulnerable populations, that our industry would be required to provide discounts on medicines so that when patients come to either the hospital or the health center, they can be aided by those discounts and the hospital or the health center can provide them at a reduced cost. So that was the intention. Very, very well-intentioned. I would argue for the health centers that participate in the program, that's essentially how it works. They have requirements that they have to adhere to because they receive grants from the federal government. And those grants are pretty specific to say, if you're an indigent patient, this is how much I can charge you.
The flip side, in terms of where the hospitals participate in the program, there has been very little rules. In fact, almost no rules for how this program can be used. As a result, what we have seen is that this program has grown exponentially over time, and largely at the benefit of hospitals, for-profit pharmacies, and pharmacy benefit managers. So just to give you a picture of how big. This is a $44 billion program. It is the second-largest federal drug program in the entire country, second only to the Medicare Part D program, which serves our nation seniors. And it is a program that almost no one has ever heard of. And there is now growing evidence that this is not a program that is actually helping patients in need, but actually driving up healthcare costs, which is kind of counterintuitive, but let me explain.
Because what hospitals can do is buy a medicine from our company, often at a 50% or more discount. They buy low, they mark up, oftentimes three or fourfold, and they will sell it to patients, the government or health plans at that inflated price. And the arbitrage in the middle, they're free to keep for themselves. So the evidence has showed that as a result of that, hospitals that are 340B, that participate in 340B, use more expensive medicines compared to non-340B hospitals. They charge patients about 150% more than in a non-340B hospital, and they're charging health plans and the government oftentimes three times what a non-340B hospital is charging them.
So you look at that evidence and you say, that just doesn't seem to make sense. We're actually, we've got a program that is driving up cost. It's also driving consolidation. So what we often see, particularly in rural areas, is that hospital systems are buying up community physician practices. They bring those practices in-house, which means that if I'm living in a rural area, I may no longer have access to a community provider, and I also may be paying more because I'm being treated in a hospital setting as opposed to a community setting. So there's lots of evidence that this is a program that is in need of some changes and reforms to ensure that the people that it was intended to help are actually being helped by the program.
Rebecca Willumson:
So, what do we do? How do we fix these issues?
Lori Reilly:
That's a great question. So, we have joined, actually, with over 20 other organizations, including the National Association of Health Centers, that participate in the 340B Program, to say there are some commonsense reforms that need to happen to ensure, again, that patients are being helped with this program. So, it's, in a nutshell, a couple of high level reforms.
One, let's ensure that patients that are being seen at a 340B hospital or at a health center actually are getting a benefit, a direct benefit from the discounts that are being provided. So that's one principle.
The second is, let's ensure that the entities that are participating in the program are actually treating vulnerable populations. Because what we've seen over time is, when this program first launched, there was a little less than 100 hospitals that participate. Today, over half of all hospitals, acute care hospitals in the country are now participating in the program. Many of them do see vulnerable populations, but many of them use the 340B Program as a profit center and not necessarily an opportunity to share direct benefits with patients.
And then the third is around accountability. Our belief is if you're going to get a benefit, particularly one in the tune of $44 billion, that there should be some accountability as to where the resources are going. If they are in fact using those resources to help patients, then they should be happy to share where the money is going and how they're actually helping patients. So we've been working, again, in this coalition for the last six or seven months. Our goal is to work with Congress, hopefully bipartisan members of Congress, to take a fresh set of eyes to this program and say, "Listen, it was created over 30 years ago. It's time to look and see if the program is meeting the needs of the patients it serves and the intent that Congress had when it passed."
Rebecca Willumson:
So, to close out, I've got two questions that I'll ask you. As we look at the year ahead, tell me, what excites you the most, but then conversely, what also concerns you the most?
Lori Reilly:
Yeah, that's a great question. I mean, it's hard to be at JP Morgan and not be excited about the science that has been talked about all week, candidly. And we've seen lots of advancements just over the last year come out of industry, whether it's for sickle cell, postpartum depression, hemophilia, and the like. And so as someone that wants to see innovation and wants hope for patients, there's a lot to be excited about.
Conversely, I would say we're at a point in time where, as an industry, we rely on a handful of, I would say, bedrock principles that support that innovation and allow it to thrive. One is a strong intellectual property system, ensuring that as our companies make investments, that they can get a return for those investments and that that investment's protected. Two, a sound regulatory system, an efficient and somewhat predictable food and drug administration process to get medicines approved. And then last, a reimbursement system that adequately reimburses for the innovation. And I would say across all three of those, we are seeing attacks from a policy perspective that I think gives a level of uncertainty and pause to investments that need to be made oftentimes 10 to 15 years before you actually see results.
So on the intellectual property side, we've seen, for example, the Biden administration support waiving intellectual property for COVID vaccines. And that, for companies that made investments when the world needed us, it sends a signal that you can make that investment and when you do, that the world has the right to seize those patents. And so that, I worry about the chilling effect that has. They recently put forth a proposal on a policy called March-In which would say, if we happen to work with government in terms of trying to bring a collaborative innovation forward, if the government doesn't like the price that we set for it, well, they can march in and seize the patent. I worry this will chill the kind of ecosystem that really sets the US apart from the rest of the world. We should want collaboration with academia, with industry and government. But if we put rules in place that chill that, I worry we're destroying a key piece of what has made the US the leader in R&D.
On the reimbursement side, policies that we see as part of the Inflation Reduction Act, which will now allow the government to set the price for 10 medicines starting in 2026, and that number will go up each year. We're only allowing small molecule medicines, so pills that we take, nine years on the market before the government can come in and set the price. So as great as the innovation is that we see around us, we still need policies that support that innovation. And I worry that we're at a point in time where a lot of those policies threaten future innovation down the road.
Rebecca Willumson:
Well, that feels like a good place to stop. Thank you so much for joining me today.
Lori Reilly:
Thank you.
Rebecca Willumson:
I really appreciate it.
Lori Reilly:
Appreciate it.